Tim Cook on the iMac: "cannibalization is a huge opportunity for us"

Wow, Apple's share price dropped by about 10% after hours. With a market capitalisation of about $480B, that's $48B wiped off the stock. That's over double Dell's market cap, or just under half Intel's.

I know, these are not real valuations, but it's interesting to see it from that perspective.

I have to wonder - what the hell are the investors thinking? The numbers were okay in some respects, and very good in others. There's every sign of positive news for the next quarter... I know Apple stock typically drops a little after results, but this is ridiculous.

There is very little that is real about stock prices. It is all about psychology. Once again the market is unable to see what Apple will do or can do. Wall Street understood the iPhone once Apple launched it, but Wall Street had no clue about iTunes or iPods. No one with a phone needs an iPod anymore, but iTunes has fully replaced the music store, but that is not as big a market. Wall Street simply lacks imagination which makes Apple so mysterious to Wall Street.The lack of imagination on Wall Street and the nebulous value of its stock speak to why Apple keeps such a large cash reserve. Wall Street will never trust Apple the way it trusts some corporation it can control because Apple is not beholding to those financial bloodsuckers.

You are right it's partly psychology, but you are completely wrong with the cash reserve making apple uncontrollable. Stock owners can kick the whole management and change directions if they want, cash reserve has nothing to do with it.

There are some dark clouds in apples horizon, and they are making investors anxious. iPhone margins seem to be shrinking, and apple fell short on predicted sales.

So, increase in revenue, 13bn profit in a recession and year on year growth for iPhone of 29% in a slow market despite one of the biggest software fuckups Apple has made in recent history (maps). Mac sales down a bit, PC market as a whole down 20%.

Yeah, sure sounds like a disaster to me....

Well last year they sold 5.2m macs, now only 4.06m.

Maybe the margins are less if we knew how many ipad minis's vs ipad4s were sold, as well as iphone4/4s vs 5. They can't be getting the same margins on all of them. But Tim Cook is right, and while it is better cannibalization happens in house, it still hurts margins. But BFD, they made 13 billion in profit again.

The problem with their Mac lines is that they are actually deadly afraid of cannibalization. Provide a 1000$ 15" Macbook already. Give us some goddamn flexibility. Their Macbook pricing structure may bring many people to pay huge amounts of money for hardware they don't actually need but I am pretty sure it turns away a lot of people as well. No wonder their Mac sales are falling

That's not the definition of cannibalization, that's the definition of price segmentation.

They have MacBooks from $1k and up already and have approximately 30% margin at each part. To generate a $1k 15" MacBook would require the thing cost approximately $700 or so to make, which means you have to take the current MBP and remove $600 or so worth of components.

You could go from the 3615QM to the 3610ME and shave about $100 from the thing. You could probably remove the ODD for another $30 or $40. Use the Intel HD 4k and save another $40 or so, I think. Cut the battery by 1/2 and save another $40 or so. We've only reduced component cost by about $200 so far, unfortunately. You can swap out the screen for a 1366x768 and probably save another $30 or $40. You can use injected molded plastics instead of unibody aluminum and probably save another $30 or so, get rid of the Thunderbolt controller for another $10, get rid of the keyboard backlight and multitouch trackpad for another $10, and you've shaved $280 from the costs.

You still have to reduce the price of the components by another $320 for Apple to sell you a $1k 15" MBP; maybe reduce the HDD another 300GB $20 or so and you have reduced the components enough for Apple to sell you a 15" MBP for $1.3k instead of $1.8k

Do you really want to buy such a crappy laptop from Apple?

Bahn humbug 1000 15" Notebooks are not crappy. There are literally dozens of notebooks available for 599. Now THEY are crappy. 1k gives you a very very decent notebook. (of course not from apple)

And since the smallest 15" notebook currently costs around 2k there is room in between. It would just require some flexibility. If I want a bigger screen I do not necessarily want to buy the goddamn quad core CPU.

I think they've already been surpassed in most categories of comparison (specs/customization/variety/value) in the smartphone category.

Are you ready for this?

The iPhone has been surpassed in all the categories you listed since it's inception yet they sell increasing amounts each year.

So now that that's out of the way, do you think just maybe those 4 things you listed aren't the reason that people love iPhones? It's completely amazing to me that some people, even 5 years from the first iPhone still don't get this. (And before anyones says marketing, Samsung is way outspending Apple)

Of course iPhone sales are increasing, but it's a rising tide, the whole smartphone market is exploding, and while Apple keeps selling iPhones, overall they're losing market share, especially when you split the pie by OS.

People had a similar argument about RIM (I realize the companies are in very different states of health right now) that they had a passionate user base and were putting cash in the bank off the real sales they were still making. But the concern is over the future. Just selling slightly improved iterations of iPhones and iPads isn't a viable 10-year plan.

People had a similar argument about RIM (I realize the companies are in very different states of health right now) that they had a passionate user base and were putting cash in the bank off the real sales they were still making. But the concern is over the future. Just selling slightly improved iterations of iPhones and iPads isn't a viable 10-year plan.

So what's the plan for Nokia, Samsung, Sony and RIM? That's all they're doing in this space.

Does Apple have to release something revolutionary every year? Are you holding Apple to a standard that no-one else is held to?

It's one of the things that bugs me about analysis of this market. Apple arguably changed the landscape for smartphones and tablets, but people cry "so what have you done for me today?" and damn them for not changing the landscape this year.

I'm not saying Apple should be able to rest on their laurels, but they're improving their products every year, sometimes dramatically. What is it that people expect from Apple compared to every other company in the same market?

It's one of the things that bugs me about analysis of this market. Apple arguably changed the landscape for smartphones and tablets, but people cry "so what have you done for me today?" and damn them for not changing the landscape this year.

I'm not saying Apple should be able to rest on their laurels, but they're improving their products every year, sometimes dramatically. What is it that people expect from Apple compared to every other company in the same market?

They are sort of becoming a victim of their own success with hint of apprehensiveness of the fact that Steve Jobs isn't at the helms anymore. So, as far as investors and analysts are concerned, any perceived weakness in Tim Cook's part is immediately seens as Apple death throes.

If Apple is serious about being a post-PC consumer electronics company, they're going to need to move into some new product categories (or "create" them). Though they've still got a vibrant iPhone ecosystem with apps and passionate users, I think they've already been surpassed in most categories of comparison (specs/customization/variety/value) in the smartphone category, and with both Android and Microsoft pushing hard on the tablet front, their admittedly impressive iPad is thiiiiiiis close to being surpassed, it's only a matter of time.

Only the paranoid survive.

Apple recognized the “death” of the iPod sometime around maybe 2004–2005, and replaced it with

Quote:

… three revolutionary products. The first, a widescreen iPod with touch controls. The second, is a revolutionary mobile phone. And the third is a breakthrough Internet communications device.

Of course, the iPod is still selling quite well, although it hardly resembles its 2005 kin. And I won't make any claims that the rest of the world will sit by for 5–10 years; Samsung and others would like a piece of the iPhone market, duh.

But let's be realistic: in developed (wealthy) nations, only about half the population has yet seen the need for a smartphone versus a dumbphone and/or landline. And many of that 50% who have bought a “smartphone” aren't using it for much more than featurephone voice/SMS/PDA functions. (Maybe the device is barely capable of much more.) So functions such as NFC transactions, advanced voice, VR and many others can/will extend the smartphone market for AT LEAST a couple of years. Several of these functions are available on competitive devices, today, and aren't actually useful to a consumer who has to spend more than 30 seconds to figure them out.

Apple has prospered through building out a balanced package of capabilities, retail, ecosystem, services, carrier deals, etc. Their challenge is not JUST to come up with a whizbang Widget, but rather, to introduce an integrated Widget system that people can understand and easily use for functions that make sense.

No. iMac sales have been fine. There aren't any of the new ones around and the old ones were out of stock since November or October. It's an issue of supply.source: I work in an independent Apple retailer. We have over 30 orders for iMacs that have not been filled.Pisses me off so much to have to tell people I have no idea when they will get their iMacs.

No. iMac sales have been fine. There aren't any of the new ones around and the old ones were out of stock since November or October. It's an issue of supply.source: I work in an independent Apple retailer. We have over 30 orders for iMacs that have not been filled.Pisses me off so much to have to tell people I have no idea when they will get their iMacs.

" iMacs were down by 700,000 units year over year. As you remember, we announced the new iMacs late in October. And when we announced those, we announced that they would ship—the first one, the 21.5-inch—in November, and we did ship it at the end of November. We announced that the 27-inch would ship in December, and we did ship that in mid-December. And so there were limited weeks of ramping on these products during the quarter.

We left the quarter with significant constraints on the iMac. And we believe—we know—that our sales would have been materially higher if those constraints would not have existed. We tried to tell people this on the conference call in October; I think I said that we would have significant constraints on iMac. But I recognize to some folks, this may be a surprise.

Number two: If you look at last year, as Peter went through in his opening comments, we had 14 weeks in the quarter, we had 13 weeks in the quarter this year. Last year, in the average week, we sold 370,000 Macs.

The third part of the bridge here would be that our channel inventory was down from the beginning of the quarter by over 100,000 units, and that’s because obviously we didn’t have the iMacs in channel inventory and it was in significant constraint.

So if you just take these three factors, they bridge more than the difference between this year’s sales and last year’s sales."

Apple was largely supply constrained in the quarter and still had one of the most profitable quarters of any company in history.

Actually Apple really needs to pull product releases away from the fall. Having product launch coincide with the busiest quarter of the year is a recipe for being short on stock. If they had summer releases and ramped production, sales would have been much better.

The problem with their Mac lines is that they are actually deadly afraid of cannibalization. Provide a 1000$ 15" Macbook already. Give us some goddamn flexibility. Their Macbook pricing structure may bring many people to pay huge amounts of money for hardware they don't actually need but I am pretty sure it turns away a lot of people as well. No wonder their Mac sales are falling

No they are not! (afraid of cannibalization). Apple does that as their strategy all along, self cannibalization of their same product lines with new models priced exactly the same as the one you bought 2 years ago with slightly better features (or in some cases way better features). This attracts upgrades as we call it but in exact fact, this is self-cannibalization!.What is new is the iPad Mini that started the cannibalization of the older/bigger iPad. Both product categories exist so one will favour another as many users will not want to own two iPads. However, the cheaper price Mini can be spread to more siblings in the house which is a good thing. The nett effect is more volume, hence, better revenue!.

In the iMac space, the fusion drive is the real new feature worth the money to some. There is little performance improvements but styling changes might appeal to some as well. Again, self cannibalization at play here. See it ?.

When I read about lowered profit margins it made me wonder, wonder if the pressure put on Foxconn to improve the working conditions at its production facilities was costing Apple some of its profit margin.

I doubt it. The lower margins are because all the products in Apple's line are new, and Apple probably paid a lot for instant ramp-ups of production for the holiday season. The iPad Mini apparently has a very low margin by Apple standards (Oppenheimer said so). I'm sure that anything money could solve in the problems Apple is having with friction-stir welding for the new iMac was solved. I have said before that introducing new products in the fall is a risky strategy for Apple, and I think they needed more time to get their production processes in order for this holiday season.

Their margins on existing products will creep back up during the year, and better margins on the iPhone 5 and iPad Mini will help overall margins a lot. However, new toys will likely keep overall margins down.

I'm not saying Apple should be able to rest on their laurels, but they're improving their products every year, sometimes dramatically. What is it that people expect from Apple compared to every other company in the same market?

It's just geek rage and hate. Sound and fury signifying nothing. You can't get through to them. It's impossible. It's far healthier to just ignore them.

People had a similar argument about RIM (I realize the companies are in very different states of health right now) that they had a passionate user base and were putting cash in the bank off the real sales they were still making. But the concern is over the future. Just selling slightly improved iterations of iPhones and iPads isn't a viable 10-year plan.

So what's the plan for Nokia, Samsung, Sony and RIM? That's all they're doing in this space.

Does Apple have to release something revolutionary every year? Are you holding Apple to a standard that no-one else is held to?

It's one of the things that bugs me about analysis of this market. Apple arguably changed the landscape for smartphones and tablets, but people cry "so what have you done for me today?" and damn them for not changing the landscape this year.

I'm not saying Apple should be able to rest on their laurels, but they're improving their products every year, sometimes dramatically. What is it that people expect from Apple compared to every other company in the same market?

Apple is held to a higher standard than all other companies because they are valued higher than all other companies. You are talking as if Apple hasn't been rewarded at all. They have been rewarded with their stock price and are the most valued company in the world. I'm not a stock market analyst, but it seems to me that Apple stock has been over priced for some time now, based on the speculation that they will continue to introduce innovative new products. For all of their last three hits, the iPod, iPhone, and iPad, they essentially invented the market, then enjoyed the fruits of being the first-mover (I realize that they didn't invent the mp3 player, the smartphone, or the tablet, but for all intents and purposes, they are largely responsible for the explosion in popularity of each of those product segments). Can they continue to popularize new markets?

What is scary is that they are currently the most valuable company in the world (by market capitalization) and they deal primarily with consumer electronics. Easily one of the most fickle industries to compete in, where companies regularly disappear into obscurity within years of being at the top.

So yes, in order to justify their stock price, they have to maintain a higher standard than everyone else by maintaining a high potential for growth, and the best way they can do that is by introducing new, revolutionary products. The problem is, their competitors have now caught up with yesteryear's innovation. I'm sure Apple could continue to do a good business in the long term maintaining and incrementally improving the product lines they currently have, but that wouldn't justify a $500B price tag. Once again, the real question is, how much longer can we expect Apple to create an iPhone-like innovation? Maybe they have a few more products up their sleeves, but I am certain that no company can keep up that kind of growth in the long term. What will be interesting is seeing where the stock price lands based on their existing business, rather than speculation that they will continue to invent new product segments into eternity.

So yes, in order to justify their stock price, they have to maintain a higher standard than everyone else by maintaining a high potential for growth, and the best way they can do that is by introducing new, revolutionary products. The problem is, their competitors have now caught up with yesteryear's innovation. I'm sure Apple could continue to do a good business in the long term maintaining and incrementally improving the product lines they currently have, but that wouldn't justify a $500B price tag. Once again, the real question is, how much longer can we expect Apple to create an iPhone-like innovation? Maybe they have a few more products up their sleeves, but I am certain that no company can keep up that kind of growth in the long term. What will be interesting is seeing where the stock price lands based on their existing business, rather than speculation that they will continue to invent new product segments into eternity.

If you look at Apple's P/E ratio rather than their overall value then they don't look that expensive. At the moment it is trading at 11.64x earnings which is relatively low for a tech company. There are utilities that trade at higher ratios than that and those are companies where you're not really expecting much growth at all but are instead predicting roughly constant profitability in an unchanging market.

Compare this with Microsoft (14.92), Google (22.94), HP (11.48), Amazon (3830), and you get the impression that the predicted slowdown in Apple's growth has already been priced into the shares. If the market price is correct then we shouldn't expect to see any big growth in profits in the future.

Well I'm sure the bar graphs and the $2.65 dividend will make up for the $50 dollar loss in after market trading.

No anybody that had stock yesterday lost a net of $50 in value...given the fact that if they had any other stock they wouldn't have lost the money. Then again what kind of math do you expect from an apple fanboy.

What is scary is that they are currently the most valuable company in the world (by market capitalization) and they deal primarily with consumer electronics. Easily one of the most fickle industries to compete in, where companies regularly disappear into obscurity within years of being at the top.

So yes, in order to justify their stock price, they have to maintain a higher standard than everyone else by maintaining a high potential for growth, and the best way they can do that is by introducing new, revolutionary products. The problem is, their competitors have now caught up with yesteryear's innovation. I'm sure Apple could continue to do a good business in the long term maintaining and incrementally improving the product lines they currently have, but that wouldn't justify a $500B price tag. Once again, the real question is, how much longer can we expect Apple to create an iPhone-like innovation? Maybe they have a few more products up their sleeves, but I am certain that no company can keep up that kind of growth in the long term. What will be interesting is seeing where the stock price lands based on their existing business, rather than speculation that they will continue to invent new product segments into eternity.

If you look at Apple's P/E ratio rather than their overall value then they don't look that expensive. At the moment it is trading at 11.64x earnings which is relatively low for a tech company. There are utilities that trade at higher ratios than that and those are companies where you're not really expecting much growth at all but are instead predicting roughly constant profitability in an unchanging market.

Compare this with Microsoft (14.92), Google (22.94), HP (11.48), Amazon (3830), and you get the impression that the predicted slowdown in Apple's growth has already been priced into the shares. If the market price is correct then we shouldn't expect to see any big growth in profits in the future.

10-12 is actually the normal range. The higher p/e of Google and Amazon assumes pretty fast profit growth for Google and Really fast profit growth for amazon. The problem with apple is that they are so huge and their insane profits are build on very high profit margins. Much higher margins than their competitors in the market. It could go up but it could just as easily go down if their next products are as boring as the iphone5 (great device but not the knockout they would need to sustain their special status)

So, increase in revenue, 13bn profit in a recession and year on year growth for iPhone of 29% in a slow market despite one of the biggest software fuckups Apple has made in recent history (maps). Mac sales down a bit, PC market as a whole down 20%.

Yeah, sure sounds like a disaster to me....

Well, Mac sales were down from 5.2 million to 4.1 million, that is 21% decrease in sales. Which would be a bigger decrease than the whole PC market. So, they basically performed worse than the rest of the PC industry.

So, increase in revenue, 13bn profit in a recession and year on year growth for iPhone of 29% in a slow market despite one of the biggest software fuckups Apple has made in recent history (maps). Mac sales down a bit, PC market as a whole down 20%.

Yeah, sure sounds like a disaster to me....

Well, Mac sales were down from 5.2 million to 4.1 million, that is 21% decrease in sales. Which would be a bigger decrease than the whole PC market. So, they basically performed worse than the rest of the PC industry.

Agreed, as well the loss in iPod sales don't directly translate into additional iPhones, every smartphone competitor took a bite of those sales.

So, increase in revenue, 13bn profit in a recession and year on year growth for iPhone of 29% in a slow market despite one of the biggest software fuckups Apple has made in recent history (maps). Mac sales down a bit, PC market as a whole down 20%.

Yeah, sure sounds like a disaster to me....

Well, Mac sales were down from 5.2 million to 4.1 million, that is 21% decrease in sales. Which would be a bigger decrease than the whole PC market. So, they basically performed worse than the rest of the PC industry.

Agreed, as well the loss in iPod sales don't directly translate into additional iPhones, every smartphone competitor took a bite of those sales.

I have to disagree. Yes, sales were down for that quarter. But it was not because people were just not willing to buy Apple Mac products (for the most part). It was because of unavailability of the product (either not ready to ship for over a month or not enough in the pipeline). Even today the iMac line in the Apple online store shows 2 - 4 week shipping times depending upon the model and build to order configuration. The converse is the situation with HP, Dell, etc. People are just not willing to buy those systems like they used to. On average none of the "PC" vendors have people waiting on availability of those systems.

Assuming Apple does finally get its act together in the next few weeks and gets production up enough then the Mac sales will definitely rebound.

Apple needs to get its shipping times (from order to it at the person's door) down to less than a week across the board (ignoring the actual physical shipping time which is dependent upon the physical shipper). AND they need to get an update Mac Pro out the door SOON!

Well, Mac sales were down from 5.2 million to 4.1 million, that is 21% decrease in sales. Which would be a bigger decrease than the whole PC market. So, they basically performed worse than the rest of the PC industry.

Agreed, as well the loss in iPod sales don't directly translate into additional iPhones, every smartphone competitor took a bite of those sales.

Jeez. Mac sales drop was explained in detail by Cook, I provided the quote and link further up the page.

As far as iPod cannibalization, most of it is likely from iPhones and iPads.

They sold 2.7 million less (lower cost) iPods.

But they sold 16.6 million more (higher cost) iPhones and iPads.

That is the kind of cannibalization that most companies only dream about.

Did someone actually say that Microsoft are pushing hard on the tablet front? If Microsoft sold 1 million Surfaces they've only got another 99 to go before they catch up.

And did they mention that wonderful catch-all term "Android"? Rather they should be talking about Acer or Toshiba or Asus or Amazon or even good ol' Samsung and neither of those have sold as many tablets. In fact, some of them won't even tell us how many. Why doesn't that piss off Wall St?

True, it may be only a matter of time before the iPad falls but it could also be a matter of time before everybody else gives up.

I'm not a stock market analyst, but it seems to me that Apple stock has been over priced for some time now, based on the speculation that they will continue to introduce innovative new products.

Methinks you're close but not quite spot-on here.

Wall Street doesn't understand technology, doesn't care about innovations. The questions on the call were about market share, about competition from low-cost providers, about handling transitions within and across, product lines. That is, they asked about the future revenue and profit growth of Apple. None of the callers were so crass as to demand “MOAR PROFITS!!!” but they want to see that Apple is going to produce them. I could almost feel the air go out of the “room” when Cook reiterated Apple's thrust on great products (rather than selling cheapo phones in China or selling Apple-branded earmuffs).

Yes, it's easier to grow a business when you have innovative gadgets that people have never been able to buy before, but as many commenters note, Google is growing its business of selling ads, without making any money — by actually treating Android etc as cost centers for selling ads — and they have an easy-to-understand, no-heartburn story that doesn't make for the volatility of views as with Apple.

So cannibalization is something the street understands, and I didn't get any sense of angst when Cook talked about it (in VERY different terms than this article has presented). Overall growth rates are a different story.

I use a MacBook at home but I'm provided either a Dell or HP laptop for work. I use both of my systems hard - the office systems don't last. The last three broke in less than a year. I'm not alone in this - all the department systems break often and there's constant demand for the loaners used to replace systems under repair.

The office systems don't have quality components. They don't have the QA. They don't have the support. You really do get what you pay for.

I absolutely agree with you, Astie. Value is a strange thing. When I look at Apple desktops (the Mac Mini, iMac and Mac Pro), I don't really get the feelings of value. True, if I needed a very tiny computer, I'd probably go for the Mac Mini, and I'm sure that the iMac is really well built. But with desktops, I find value in upgradeability and flexibility, so I end up building my own system. In that sense, the value of my desktop is pretty much equal to the value of the components inside, as they're *relatively* fungible.

The same does NOT, however, go for laptops. Man, not at all. I think that anyone who has ever really gotten to use a Macbook understands this. With laptops, because of the tight integration and the increased vulnerability of the system as a whole, the whole really is more than the sum of its parts.

Now, before anyone accuses me of being brand-loyal, I'm not. I honestly don't have a preference between Mac OS and Windows, and I use both on a daily basis. I'm not a particular fan of Steve Jobs, and I don't particularly feel the need to take sides in all this Mac vs. PC nonsense. There are other, non-Apple laptops out there that are high quality (I'm thinking of Thinkpads, for example), but since we're talking about Apple, I'll stick to the subject.

So, with that said ...

The reason a Macbook is worth more than most PC laptops of equivalent technical specs is because a great deal of engineering and design go into ensuring that absolutely every aspect of the laptop is maximized and optimized for end-user use. I imagine that those who have never spent any significant time using a Macbook may doubt this, or simply not understand. The physical chassis and design of Apple laptops is, for a reason, legendary. They utilize space amazingly well, they hold up well against the years, they tend to have very high quality build components. The hardware integrates perfectly with the operating system, and the trackpads are fantastic. For me, at least, moving to a Macbook completely changed the way I interact with laptops. With the Macbook, it feels like I am able to intuitively and naturally interact with the OS, as if it's an extension of me. I have never had this with a PC laptop.

I have been pretty active in trying to replicate this with new, high end PC laptops. My work, for example, provided me with a high end Dell laptop. It just doesn't quite get there. The same goes for models in Best Buy, Costco, etc. Yes, they have multi-touch and gestures, but the response to input is delayed and often more frustrating than helpful. The battery life of my work computer, even when new, was about two hours while doing word processing.

OEM hardware is simply never equivalent to Apple hardware. They overheat, they break down, they're made of poor materials. At any given time, HP has, what, over 50 models of computer? They're constantly replacing them and changing them. And because of that, they never really design a 'perfect' laptop. Apple, on the other hand, has maybe 5 models at any given time, and they tend to make incremental changes. This leads to a more perfect laptop. They iron out the wrinkles. Thinkpads are like this, and I love them for it.

And the funny thing is, when an OEM does try to really take aim at Apple with a similar offering, the big price differential seems to disappear. Want a system that is equivalent in power to the 15" Retina Macbook Pro, and retains its battery life and proportions? Asus just released one, and it's the same price.

Again, and I really want to stress this, I'm NOT an Apple fanboy - not in the least. But I also am aware of the fact that, with laptops, not only do you get what you pay for, but the whole really is more than the sum of its parts.

Provide a 1000$ 15" Macbook already. Give us some goddamn flexibility. Their Macbook pricing structure may bring many people to pay huge amounts of money for hardware they don't actually need but I am pretty sure it turns away a lot of people as well. No wonder their Mac sales are falling

There are reasons they don't offer 15 inch MacBook for $1000.

I use a MacBook at home but I'm provided either a Dell or HP laptop for work. I use both of my systems hard - the office systems don't last. The last three broke in less than a year. I'm not alone in this - all the department systems break often and there's constant demand for the loaners used to replace systems under repair.

The office systems don't have quality components. They don't have the QA. They don't have the support. You really do get what you pay for.

I call shenanigans. Dell business laptops are pretty darn durable (we had a travelling demo with 6 of them carried in 2 backpacks for years, without issues), and they have 1 year on-site support standard, and most big companies get more years for free.

I guess you've just had a different experience than Astie and myself. Having worked for about a decade in repair, I can honestly say that Dell and HPs kept my business going. It's not a Mac vs. PC thing. It's a design thing. Dells and HPs simply aren't designed with the detail and scrutiny than Macbooks are. I would love that to change, but it hasn't, yet.

Having just finished up the Jobs biography I have to wonder if Cook is holding seances to consult with Steve on these issues as my mind immediately attributed the pro-cannibalism comments to him. It could just be that the company is holding on to his philosophy, but I have to say it'd be more interesting if Steve was sitting in on board meetings from beyond the grave.

10-12 is actually the normal range. The higher p/e of Google and Amazon assumes pretty fast profit growth for Google and Really fast profit growth for amazon. The problem with apple is that they are so huge and their insane profits are build on very high profit margins. Much higher margins than their competitors in the market. It could go up but it could just as easily go down if their next products are as boring as the iphone5 (great device but not the knockout they would need to sustain their special status)

The problem with that is that if you look at the actual rates of growth of each company then again, Apple and HP look undervalued, Microsoft looks fairly valued, Google is rather overvalued with P/E being higher than you would expect from its current growth and Amazon are off the scale with a P/E that is going to require a crazy amount of growth to ever be justified.

Apple and HP would be fairly priced if you never expected them to increase profits. I don't think we'll see the sort of growth we once did simple because of the size of each firm but neither do I think they're done growing.

So, increase in revenue, 13bn profit in a recession and year on year growth for iPhone of 29% in a slow market despite one of the biggest software fuckups Apple has made in recent history (maps). Mac sales down a bit, PC market as a whole down 20%.

Yeah, sure sounds like a disaster to me....

Well last year they sold 5.2m macs, now only 4.06m.

Maybe the margins are less if we knew how many ipad minis's vs ipad4s were sold, as well as iphone4/4s vs 5. They can't be getting the same margins on all of them. But Tim Cook is right, and while it is better cannibalization happens in house, it still hurts margins. But BFD, they made 13 billion in profit again.

Your whole post is nonsense to me. You talk about there being less Macs sold this quarter, when the entire article you are commenting on is about cannibalisation (the major part of the reason for the drop). You talk about not knowing how many iPhone 5's have been sold when the numbers are clear and all over the net on every article this morning.

I don't think I know what you're even talking about, and I'm absolutely *certain* that you don't.

10-12 is actually the normal range. The higher p/e of Google and Amazon assumes pretty fast profit growth for Google and Really fast profit growth for amazon. The problem with apple is that they are so huge and their insane profits are build on very high profit margins. Much higher margins than their competitors in the market. It could go up but it could just as easily go down if their next products are as boring as the iphone5 (great device but not the knockout they would need to sustain their special status)

The problem with that is that if you look at the actual rates of growth of each company then again, Apple and HP look undervalued, Microsoft looks fairly valued, Google is rather overvalued with P/E being higher than you would expect from its current growth and Amazon are off the scale with a P/E that is going to require a crazy amount of growth to ever be justified.

Apple and HP would be fairly priced if you never expected them to increase profits. I don't think we'll see the sort of growth we once did simple because of the size of each firm but neither do I think they're done growing.

HP looks undervalued? Are you serious? Those guys are in a dying business and have 1.2% R&D expenditure. Nobody knows if they will get their act together or not.

And Apple's profit growth just flattened out. Is that a pause before growth starts again or a turning point? Nobody knows and that's the reason the shares go down. Again Apple is so huge that it pays to be conservative here. They needed some special magic to get to these humongous profit numbers and people are starting to suspect that magic died with Steve. The last two years have been pretty damn predictable product wise.

And Google? They still have solid profit growth and are active in a large amount of areas that could become the next big thing. And they are still only a quarter the size of Apple.

Regarding the AppleTV, Mr Cook isn't saying it's a hobby for users. He's saying it's a hobby for Apple. It may sound like a nitpick, but it's actually a very important distinction.

Pretty serious hobby. Half of what I watch now passes through mine.

Same for me, more in fact with Netflix on it, the only thing I ever swap to is Plex on my sever which is also connected to my plasma. In fact if I could get Plex on my AppleTV without jailbreaking it would be the only device I use for TV watching.

It's one of the things that bugs me about analysis of this market. Apple arguably changed the landscape for smartphones and tablets, but people cry "so what have you done for me today?" and damn them for not changing the landscape this year.

I'm not saying Apple should be able to rest on their laurels, but they're improving their products every year, sometimes dramatically. What is it that people expect from Apple compared to every other company in the same market?

They are sort of becoming a victim of their own success with hint of apprehensiveness of the fact that Steve Jobs isn't at the helms anymore. So, as far as investors and analysts are concerned, any perceived weakness in Tim Cook's part is immediately seens as Apple death throes.

Good... let the price drop another $100 per share... and then get ready to ride it right back up to $600+ when 3 years of solid numbers and whatever "the next big thing" is drags it right back up. Wall Street may be fickle, but they're always greedy too.

The problem with that is that if you look at the actual rates of growth of each company then again, Apple and HP look undervalued, Microsoft looks fairly valued, Google is rather overvalued with P/E being higher than you would expect from its current growth and Amazon are off the scale with a P/E that is going to require a crazy amount of growth to ever be justified.

Apple and HP would be fairly priced if you never expected them to increase profits. I don't think we'll see the sort of growth we once did simple because of the size of each firm but neither do I think they're done growing.

I'll give it you here...

Overall, it looks like we're hitting a plateau in these firms' core markets. Sure, there some vast potential for expansion--but for now looks like cheap mobile devices in the developing world. Sometimes referred to as the "Zombie Apocalypse"--and will probably be dominated by low-margin, high-volume players.

No matter how much Wall Street may like it, I don't see some type of exponential growth happening in this market segment, as in the past...

What is scary is that they are currently the most valuable company in the world (by market capitalization) and they deal primarily with consumer electronics. Easily one of the most fickle industries to compete in, where companies regularly disappear into obscurity within years of being at the top.

Go to any business page to get the truth on Apple. Its margins will have to shrink to survive in a ever growing competitive market. Even Apple's own products are affecting others. Mac sales down because of iPad sales? I may not totally buy that reason but its certainly going to affect margins for Apple. If Apple is selling more iPad Mini's the retina display Macbook Pro's. The margins are going to be affected.Apple is facing that wall it has always choose to face. How to find more customers willing to pay what Apple wants them to pay. Asian Countries like China have a much lower median income per capita then the US or Europe. They may have people, but can they afford a Apple product?

HP looks undervalued? Are you serious? Those guys are in a dying business and have 1.2% R&D expenditure. Nobody knows if they will get their act together or not.

HP have struggled recently but their stock has already taken an absolute pounding so a lot of the bad news has already been priced into their value.

They still make a lot of money and have some very profitable sectors so it's not necessarily that hard for them to get their shit together and start growing again, particularly when they still command a huge market share. IBM had some terrible years in the 90s but also retained key parts of the business which were doing well. A leaner, more focused HP could do very well.

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And Apple's profit growth just flattened out. Is that a pause before growth starts again or a turning point? Nobody knows and that's the reason the shares go down. Again Apple is so huge that it pays to be conservative here. They needed some special magic to get to these humongous profit numbers and people are starting to suspect that magic died with Steve. The last two years have been pretty damn predictable product wise.

I think a big part of that is the smartphone market as a whole. It's been a long time since any product from any manufacturer jumped out at me as being particularly novel or appealing. Another phone, bigger and faster than the last is not what I call innovative but that's all we've been getting from the main players.

The last thing that genuinely struck me as different and clever was Windows Phone and that's already a couple of years old.

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And Google? They still have solid profit growth and are active in a large amount of areas that could become the next big thing. And they are still only a quarter the size of Apple.

They also pretty much [only make money from advertising in which they have almost the entire market. The risk is that the only way is down and for all their innovation, they haven't demonstrated anything that looks like being a big money spinner.

Definitely true, but there are a lot of ifs involved in that. Given the past history its just as realistic to imagine a death spiral. That's the reason the shares are down. Investors hate uncertainty with some good reason.

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I think a big part of that is the smartphone market as a whole. It's been a long time since any product from any manufacturer jumped out at me as being particularly novel or appealing.

True, but only Apple is really hurt by this because they are the ones with the sky high profit margins that are build on them being head and shoulders above anything the competition can offer. Which is just not true anymore. Android devices are now just as functional and almost as polished, have almost as many apps and are coming in many different ways forms shapes and have some cool features Apple cannot offer (intents, third party keyboards like Swift, ... ) Cellphones just have commoditised. Which is not a bad thing. You can pick pretty much any phone and it will have excellent email, internet, facebook etc. support, a large amount of mobile games and integration with media services to download books, music etc. And this is all the normal customer needs. So innovation isn't as needed in this sector, current phones are just good enough. Which is bad news for a company like Apple which makes billions by being special and by getting its loyal customers to upgrade every 1-2 years. Which is harder to do if you change your product as little as you did with the iPhone 4,4s and 5.

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They also pretty much [only make money from advertising in which they have almost the entire market. The risk is that the only way is down and for all their innovation, they haven't demonstrated anything that looks like being a big money spinner.

Which is not true, sure their various search businesses are making the majority of their money but they have a large number of very successful products that ensure that people search the web through them and nobody else. Chrome, Android just to mention the biggest. Those two rose to the top of their fields in a couple years (while MS has been trying to get a decent phone share for a couple decades) And even if you discount that, they make billions with youtube, business apps, android (licencing and google play sales) The majority is still search, sure, but they are amazing at protecting and enhancing that search. Which other company would conquer the mobile world just to protect their search business. (Yes I have a slight case of hero worship when it comes to Mountainview)

And then we have longterm bets like wearable computing (glass) self driving cars, fiber, ... none of them huge at the moment but it would be foolish to rule them out. So no I do not think they are overvalued. The future belongs to software companies the future belongs to companies having data, the future belongs to companies who have a big cloud offering. Which other company fits to these areas like the big G.